HR benchmarking is the process of comparing similar characteristics between or within businesses, identifying the most successful practices, and integrating them into the company procedure.
It draws on both quantitative data (like HR metrics and KPIs) and qualitative insights (such as team member feedback and company culture assessments) to paint a complete picture of what’s working and why.
“Strategic alignment starts with understanding,” says Amanda Chaitnarine, Senior Director of HR Diagnostics at McLean & Company, a global HR research and advisory firm. “Companies should use benchmarking data as a guideline and feel empowered to set attainable, data-driven goals that help them stay focused on improvement. This will help organizations move faster while earning trust and making better decisions.”
Once those benchmarks are set, HR teams can turn them into clear targets that define what progress looks like. Most companies benchmark against competitors of a similar size or industry—and examine their own top-performing teams—to identify practices and performance levels they can adapt to improve results across the business.
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Key takeaways
- HR benchmarking is a strategic process where HR professionals compare their practices and performance against those of similar organizations to identify areas for improvement
- It involves both internal and external benchmarking, allowing teams to gain insights from within their organization and from industry competitors
- While benchmarking offers significant advantages, such as revealing performance gaps and industry trends, it also requires careful analysis to ensure the data is applicable and meaningful
What are different types of benchmarking?
HR benchmarking isn’t one-size-fits-all. The right approach depends on what you want to improve, such as shortening time-to-hire, refining performance reviews, or fine-tuning your retention strategy.
Here’s a look at the different types of benchmarking and how each one can help you level up your people practices:
Internal benchmarking
Internal HR benchmarking focuses on comparisons within your organization, like analyzing how one team’s productivity stacks up against another’s or comparing the profitability of different departments. It’s a way to surface what’s working well and where there’s room to grow.
Armed with that insight, HR leaders can build on proven successes while addressing areas that need development. For example, if one department reports higher engagement or lower turnover, examining their leadership approach or team dynamics could uncover strategies that can be replicated across other teams.
External benchmarking
External benchmarking looks beyond your business to see how your people practices compare across the industry. It gives HR teams valuable context, showing how practices like compensation structures, learning and development programs, or diversity initiatives stack up against similar companies.
The goal isn’t to copy your competitors but to learn from them. Understanding how other companies attract talent, design benefits, or nurture culture can spark new ideas for your own people strategy.
You might find that organizations with lower turnover emphasize internal mobility or invest more in leadership development, while those with higher engagement scores prioritize flexible work options and clear career path templates. These insights can then guide you in adapting proven practices to fit your own ways of working.
Other types of benchmarking
You can try other benchmarking methods depending on the insights you’re looking for. These include:
- Process benchmarking: Examines specific workflows, such as onboarding, recruitment, or performance management, to identify more efficient or effective ways of operating. This can be applied internally across departments or externally against other organizations.
- Competitive benchmarking: Measures the overall performance of your company against direct rivals, specifically to uncover how to gain a competitive edge.
- Functional benchmarking: Looks at how well organizations achieve outcomes like revenue growth, market share, brand recognition, or productivity. Comparisons may be applied internally across business units or externally across high-performing companies.
- Strategic benchmarking: Evaluates how organizations shape, execute, and adjust their long-term strategies to reach major objectives, offering insight into both internal planning and external strategic positioning.
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What can you benchmark?
Benchmarking gives HR teams a clearer picture of what’s working well and where there’s room to grow. Some of the key areas worth exploring include:
- Organizational structure: Your org structure shapes how work flows across teams. Review your roles, reporting lines, and communication patterns against others in your industry to spot gaps and strengthen collaboration.
- Compensation planning: Compensation plays a major role in how your people feel valued and supported. Compare your salary ranges with current market data to stay competitive and build trust through fair, transparent pay.
- HR costs: Every organization invests in its people differently. Analyze your HR spending alongside similar companies to identify where resources have the most impact and where you can optimize.
- Career development: Growth opportunities keep people motivated and engaged. Evaluate your learning, mentoring, and promotion programs against industry standards to find ways to expand career paths and build future leaders.
- Work environment: A supportive work environment fuels productivity and satisfaction. Assess your flexibility, workspace setup, and work-life balance policies to ensure they align with what people value most.
- Engagement: Engagement reflects how connected your people feel to their work and purpose. Compare your engagement results with similar companies to uncover what drives motivation and where to focus next.
- Retention: Keeping great people is just as important as finding them. Review how your retention and turnover rates compare to industry averages to identify what keeps people loyal and where improvements can be made.
- Wellness: Healthy team members make for a healthy business. Compare your programs with those of other organizations to see whether you’re meeting evolving expectations around health, balance, and belonging.
- Productivity: Productivity metrics show how efficiently work gets done. Measure your output and efficiency against industry benchmarks to uncover opportunities to streamline processes and strengthen results.
Advantages of HR benchmarking
HR benchmarking gives people teams a clearer view of what’s working—and where there’s room to improve. HR leaders can uncover performance gaps, analyze their root causes, and make more informed decisions about strategy and policy.
Beyond targeted improvements, benchmarking also offers broader advantages. It helps teams:
- Gain data-driven insights into performance and contributing factors
- Stay ahead of industry trends and evolving expectations
- Strengthen existing HR practices
- Support a more engaging and consistent team member experience
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HR benchmarking challenges
It’s also worth noting that there are some challenges to benchmarking. First, it can be difficult to compare organizations that have fundamental differences. Because so many factors are at play in how an organization performs, raw numbers don’t always give a complete picture of what’s going on.
This is why HR professionals must analyze benchmarking data alongside broader issues. For example, the fact that an organization takes longer to fill open positions than another may not necessarily mean it is doing a poorer job at ethical hiring. Instead, it might indicate that they have higher talent acquisition standards, and their retention rates are better as a result.
Another challenge of benchmarking is that not all terminology is used consistently from organization to organization, meaning people can’t always compare workforce management metrics one-to-one. For example, what one company calls turnover, another may call attrition.
HR benchmarking process
To implement impactful benchmarking, HR should:
1. Define the focus area
Collaborate with colleagues to pinpoint the issue that needs improvement and frame a clear question the benchmarking process will answer. For example, if turnover is increasing among high-performing managers, the guiding question might be: What retention strategies and compensation structures are other companies using successfully and how do ours compare?
This kind of framing keeps HR benchmarking grounded in real business needs and connects insights directly to operational outcomes.
2. Identify helpful metrics
Once the focus question is defined, the next step is to decide which metrics will provide meaningful answers. Different metrics allow HR leaders to compare specific aspects of their company with those of other companies and to benchmark progress internally over time.
Ken Matos, director of market insights at HiBob, emphasizes that a metric is only valuable if it tells a causal story: “If you can look at a number and say, ‘I saw this, therefore these outcomes will follow,’ it’s a strong indicator you’re tracking something meaningful,” he explains. Metrics that don’t tie back to outcomes in your benchmarking question can be revisited or replaced with ones that clarify what’s driving success or turnover.
To get to the bottom of rising turnover among high-performing managers, for example, useful metrics to analyze might include:
- Quality of hire: Assess how well new managers meet performance expectations, adapt to the company culture, and contribute to team success
- Turnover rate: Track how often high performers leave, identify patterns by department or tenure, and compare with industry averages
- Quality of work: Evaluate project delivery, team engagement, or feedback scores to see if performance standards are shifting
- Market index: Benchmark your company’s management performance, satisfaction, and retention rates against competitors or industry trends
- Average compensation per team member: Determine whether pay levels align with market rates and whether adjustments could improve retention
3. Collect data
After pinpointing your key metrics, focus on finding external information that gives them real-world context. “The more data you’ve got, the more accuracy you can have and the more insight into making strategic plans,” says Richard des Moulins, founder and CEO of ROCKCREST, an HRIS consulting and staffing firm.
Professional HR leaders engage in extensive, in-depth research to find external information that accurately aligns with their measurements. They often purchase benchmarking reports that save them from sifting through irrelevant information and provide accurate, pertinent data.
External data can also come from government workforce statistics, professional associations, job boards, and peer networks, which help HR teams understand broader trends that influence compensation, hiring, and retention across similar organizations.
4. Study the gaps
Comparing internal and external metrics, HR leaders should ask what their organization can do to reach the levels of success of other companies in their industry. HR leaders can implement changes that align with company strategy based on the data they collect.
Perhaps, for instance, a company prides itself on high base salaries. So, they decide to decrease funding for wellness programs and increase base pay. This way, the employer can offer a more competitive edge for compensation plans while maintaining alignment with the high base salary strategy.
5. Design a plan to implement the changes
HR leaders and colleagues can collaborate to implement an executive-backed plan that achieves the designated goals. A detailed plan that meshes with the company culture can increase the chances that people will readily accept the new changes.
Designing the plan itself starts with setting clear, measurable goals based on the insights gathered. Define what success looks like—for example, reducing manager turnover by 10 percent in a year or improving engagement scores in key teams.
Next, outline the specific initiatives that will help you get there, such as expanding leadership development, adjusting pay structures, or improving workload balance.
Assign ownership early so accountability is built in from the start. “Every metric must have… an owner who will do something when it moves,” says Lane McFarland, vice president of talent management at Flashpoint. Give each initiative a project lead, defined milestones, and a way to measure progress, like tracking promotion rates or turnover trends over time.
6. Analyze the long-term results
Plan regular check-ins to evaluate whether the changes are delivering the results you expected. Look for patterns in team performance, people sentiment, and business outcomes to understand what’s improving and what still needs attention.
Summarize findings in a clear report for leaders and stakeholders, highlighting which initiatives moved the needle and which need adjustment. Comparing new data with your original benchmarks helps validate progress and refine next steps.
Best practices for HR benchmarking
Effective benchmarking starts with a clear plan and the right mindset. Here are a few best practices to help you make the most of the process:
- Choose your competitors wisely. Because benchmarking is a rather involved process, you’ll have to limit the number of competitors you choose to compare your business to. When you pick the organizations you want to benchmark against, choose only the relevant ones, such as those similar to you in size or location.
- Use your network. Tap into your professional connections to gather insights and data. Networking can offer valuable information and perspectives that aren’t readily available through traditional research.
- Set up surveys. Conduct surveys within your company to gather internal data. This helps compare internal practices with industry standards and identify areas for improvement.
- Be realistic with your goals. Benchmarking can help you identify large, structural improvements to make. When setting your goals at the end of your benchmarking process, think macro and long-term rather than trying to implement all of the changes at once.
HR benchmarking examples
Benchmarking gives HR teams the context they need to make smarter decisions. Below are a few hypothetical examples featuring fictional companies that demonstrate how HR benchmarking can be applied to improve performance and support your people.
Retention benchmarks
Meet Ficta, a mid-sized book publisher that’s been struggling with high turnover. To figure out what’s going wrong, Ficta decides to benchmark against Nocta, a well-known competitor with strong retention and a reputation for happy team members.
To get started, Ficta digs into a few key data sources:
- A market research report from IBISWorld
- Nocta’s Glassdoor reviews
- Insights gathered from publishing industry networking events and online HR groups
What they discover is eye-opening. Nocta is seen as a preferred company to work for thanks to its strong brand reputation, flexible hours, and generous benefits. Team members also praise Nocta’s leadership transparency and clear career growth paths.
With this knowledge, Ficta sets out to improve brand visibility, enhance benefits, and introduce flexible working options. They also put new systems in place to encourage open communication between managers and teams, helping their people feel valued, supported, and motivated to stick around.
Cost benchmarks
VerdaTech, a growing software company, noticed HR costs climbing faster than expected. To understand what’s driving the increase, VerdaTech benchmarks against InnoSoft, a peer organization known for running a lean but effective HR operation.
VerdaTech pulls data from several sources:
- A SHRM HR budgeting report
- InnoSoft’s annual financial disclosures
- Conversations with peers at an HR leaders’ roundtable
The results are surprising. InnoSoft automates routine admin work and outsources payroll, cutting overhead while freeing HR to focus on strategic projects. The company also invests in learning programs that boost long-term efficiency.
Taking a cue from these insights, VerdaTech automates key HR tasks, reallocates funds toward team member development, and builds metrics to measure the ROI of every initiative.
Compensation benchmarks
Civica Health is a healthcare nonprofit that’s losing candidates to competitors. Curious about what’s driving the difference, Civica benchmarks against WellSpring Medical Group, an organization with stronger offer acceptance rates and lower turnover.
Civica gathers insights from:
- Salary surveys from Payscale and the U.S. Bureau of Labor Statistics
- WellSpring’s Glassdoor and LinkedIn data
- Conversations from an HR networking group for healthcare leaders
The data shows that WellSpring offers slightly higher base pay, clearer career progression, and pay transparency across teams. Team members know what to expect and see fairness in every level.
Inspired by these findings, Civica revamps its compensation structure, introduces regular pay equity reviews, and makes promotion pathways more visible to team members, creating a pay strategy built on trust and transparency.
DEI&B benchmarks
NovaWorks, a marketing agency, is ready to strengthen its diversity and inclusion efforts. To find inspiration, NovaWorks benchmarks against BrightEdge Creative, a well-known agency celebrated for its inclusive culture and progressive policies.
The NovaWorks HR team reviews:
- Public diversity reports from BrightEdge and similar agencies
- Internal feedback gathered from team DEI&B surveys
- Research from McKinsey’s Diversity Wins report and SHRM’s inclusion index
Through this research, NovaWorks learns that BrightEdge’s success comes from measurable diversity goals, regular manager training, and team member resource groups that influence company policy.
As a result, NovaWorks sets quarterly DEI&B goals, expands inclusion training, and forms an internal council to guide progress—turning good intentions into meaningful, lasting change.
Use HR benchmarking to improve company culture
Benchmarking is an ongoing process of company growth and advancement. Using benchmarking to enhance the team member experience and increase compensation, retention, and job satisfaction can lead to greater wellbeing and, in turn, a healthier company culture.
